LTE Demand Drives Softbank’s $20 Billion Sprint Purchase: Q&A

Softbank Corp. (9984) agreed to buy a stake of about 70 percent in Sprint Nextel Corp. (S) for $20.1 billion, seeking growth outside its own saturated domestic market.

With the deal, announced Oct. 15, Japan’s third-biggest mobile-phone operator is looking to benefit from a shift to faster mobile networks using long-term evolution, or LTE.

Here are answers to some frequently asked questions about LTE. The information is drawn from research by the International Telecommunications Union under the UN, IHS iSuppli, ABI Research and NgnGuru Solutions’ LTEWorld.org Website.

Q: What is it?

LTE is a standard for higher-speed mobile services being adopted by carriers around the world. The technology offers peak download rates of at least 100 megabits per second that can go as high as 300Mbps, compared to a maximum of 50Mbps for current 3G standards, according to the ITU. Upload rates are at least 50Mps and as high as almost 100Mbps, compared with a maximum of less than 30Mbps for 3G. Latency, or round-trip delay, is 50 percent to 80 percent shorter than existing standards.

The latest versions of LTE, known as LTE-Advanced, have been designated by the ITU as 4G technologies with earlier iterations considered to be 3.9G.

There’s also a competing 4G technology called WiMAX originally backed by Intel Corp. (INTC) Carriers, including Sprint Nextel Corp., that announced a plan in 2006 to build a nationwide WiMAX network now favor LTE because it’s faster and more compatible with existing 3G mobile standards.

Q: What can it do for consumers?

LTE offers faster downloads and streaming, allowing users to quickly load videos from websites such as Google Inc. (GOOG)’s YouTube and watch high-definition clips without a hitch. To put it in context, you can enjoy downloads and Internet browsing that seem as fast as WiFi connections at home. The faster service comes with a price -- LTE plans cost consumers about 20 percent more than similar 3G products, according to ABI Research.

Q: Who offers it?

Mobile operators globally, from Sprint in the U.S. to NTT Docomo Inc. (9437) in Japan to SK Telecom (017670) in South Korea, have rolled out LTE networks, with more deployments to follow in the next two to three years, according to ITU.

You need devices designed to run on LTE networks to enjoy the service. Apple Inc. (AAPL)’s latest iPhone 5 supports LTE, while other phone makers including Samsung Electronics Co. (005930) and HTC Corp. (2498) have also introduced LTE phones.

There will be more LTE devices: Asustek Computer Inc. (2357), maker of the Eee PC, will offer LTE when it becomes one of the first companies to offer tablets running Microsoft Corp. (MSFT)’s Windows RT platform this month.

Nokia Siemens Networks Oy is the largest maker of LTE equipment bought by operators, followed by Huawei Technologies Co. and Ericsson, according to ABI Research. LTE will be the main driver of an 8.3 percent growth this year in mobile network equipment revenue to $45.5 billion, according to IHS iSuppli. Fourth-generation infrastructure will rise from $8.6 billion globally this year to $25.2 billion next year, comprising the majority of all expenditure, IHS said.

Q: Why is this a big deal?

As more people download apps, games and movies on their mobile devices, faster mobile connections will be required to serve the data. The average size of an Apple iOS app grew 16 percent in the six months to September, with games getting 42 percent larger, ABI said. Global LTE subscriptions will reach 1.2 billion by 2016, compared with 16.9 million in 2011, according to IHS iSuppli.

New mobile networks cost carriers billions of dollars a year, hence the financial support Sprint sought from its deal with Softbank. The agreement allows Sprint to fund a faster expansion of LTE networks and take on bigger competitors Verizon Wireless and AT&T Inc. (T)

To contact the reporters on this story: Jun Yang in Seoul at jyang180@bloomberg.net; Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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